DTC agreement between Hungary and Georgia

7/27/2019 DTC agreement between Hungary and Georgia

1/25

AGREEMENT

BETWEEN THE GOVERNMENT OF GEORGIA

AND

THE GOVERNMENT OF HUNGARY

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION

OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

AND

ON CAPITAL


2/25

2

The Government of Georgia and the Government of Hungary, desiring to conclude an

Agreement for the avoidance of double taxation and the prevention of fiscal evasion

with respect to taxes on income and on capital, and to further develop and facilitate

their relationship,

Have agreed as follows:


3/25

3

Article 1

PERSONS COVERED

This Agreement shall apply to persons who are residents of one or both of the

Contracting States.

Article 2

TAXES COVERED

1. This Agreement shall apply to taxes on income and on capital imposed on behalf of

a Contracting State or of its administrative-territorial units or local authorities,

irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income and on capital all taxes imposed on

total income, on total capital or on elements of income or of capital, including taxes

on gains from the alienation of movable or immovable property, taxes on the total

amount of wages or salaries paid by enterprises, as well as taxes on capital

appreciation.

3. The existing taxes to which this Agreement shall apply are in particular:

(a) in the case of Georgia:

(i) profit tax;

(ii) income tax;(iii) property tax.

(hereinafter referred to as Georgian tax);

(b) in the case of Hungary:

(i) the personal income tax;

(ii) the corporate tax;

(iii) the land parcel;

(iv) the building tax.

(hereinafter referred to as Hungarian Tax).

4. This Agreement shall also apply to any identical or substantially similar taxes that

are imposed after the date of signature of this Agreement in addition to, or in place of,

the existing taxes. The competent authorities of the Contracting States shall notify

each other of any significant changes that have been made in their respective taxation

laws.


4/25

4

Article 3

GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the context otherwise requires:

(a) the term Georgia means the territory recognised by the international

community within the state borders of Georgia, including land territory, internal

waters and territorial sea, the air space above them, in respect of which Georgia

exercises its sovereignty, as well as the contiguous zone, the exclusive economic zone

and continental shelf adjacent to its territorial sea, in respect of which Georgia may

exercise its sovereign rights in accordance with the international law;

(b) the term Hungary means Hungary and, when used in a geographical sense, it

means the territory of Hungary;

(c) the terms a Contracting State and the other Contracting State mean

Georgia or Hungary, as the context requires;

(d) the term person includes an individual, a company and any other body of

persons;

(e) the term company means any body corporate or any entity which is treated

as a body corporate for tax purposes;

(f) the terms enterprise of a Contracting State and enterprise of the other

Contracting State mean respectively an enterprise carried on by a resident of aContracting State and an enterprise carried on by a resident of the other Contracting

State;

(g) the term international traffic means any transport by a ship or aircraft

operated by an enterprise of a Contracting State, except when the ship or aircraft is

operated solely between places in the other Contracting State;

(h) the term competent authority means:

(i) in the case of Georgia, the Ministry of Finance or its authorised

representative;

(ii) in the case of Hungary, the minister responsible for tax policy or his

authorised representative;

(i) the term national in relation to a Contracting State means:

(i) any individual possessing the nationality or citizenship of that

Contracting State;


5/25

5

(ii) any legal person, partnership, association or other entity deriving its

status as such from the laws in force in that Contracting State.

2. As regards the application of this Agreement at any time by a Contracting State,

any term not defined therein shall, unless the context otherwise requires, have themeaning that it has at that time under the law of that State for the purposes of the

taxes to which this Agreement applies, any meaning under the applicable tax laws of

that State prevailing over a meaning given to the term under other laws of that State.

Article 4

RESIDENT

1. For the purposes of this Agreement, the term resident of a Contracting State

means any person who, under the laws of that State, is liable to tax therein by reason

of his domicile, residence, place of management, place of incorporation or any other

criterion of a similar nature, and also includes that State and any administrative-

territorial unit or local authority thereof. This term, however, does not include any

person who is liable to tax in that State in respect only of income from sources in that

State or capital situated therein.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both

Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident only of the State in which he has a

permanent home available to him; if he has a permanent home available to him inboth States, he shall be deemed to be a resident only of the State with which his

personal and economic relations are closer (centre of vital interests);

(b) if the State in which he has his centre of vital interests cannot be determined,

or if he has not a permanent home available to him in either State, he shall be deemed

to be a resident only of the State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, he shall be

deemed to be a resident only of the State of which he is a national;

(d) if he is a national of both States or of neither of them, the competentauthorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual

is a resident of both Contracting States, then it shall be deemed to be a resident only

of the State in which its place of effective management is situated.


6/25

6

Article 5

PERMANENT ESTABLISHMENT

1. For the purposes of this Agreement, the term permanent establishment means a

fixed place of business through which the business of an enterprise is wholly or partlycarried on.

2. The term permanent establishment includes especially:

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop, and

(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural

resources.

3. A building site or construction or installation project constitutes a permanent

establishment only if it lasts more than twelve months.

4. Notwithstanding the preceding provisions of this Article, the term permanentestablishment shall be deemed not to include:

(a) the use of facilities solely for the purpose of storage, display or delivery of

goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise or of collecting information, for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of carrying

on, for the enterprise, any other activity of a preparatory or auxiliary character;

(f) the maintenance of a fixed place of business solely for any combination of

activities mentioned in subparagraphs (a) to (e), provided that the overall activity of

the fixed place of business resulting from this combination is of a preparatory or

auxiliary character.


7/25

7

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person other than

an agent of an independent status to whom paragraph 6 applies is acting on behalf

of an enterprise and has, and habitually exercises, in a Contracting State an authority

to conclude contracts in the name of the enterprise, that enterprise shall be deemed tohave a permanent establishment in that State in respect of any activities which that

person undertakes for the enterprise, unless the activities of such person are limited to

those mentioned in paragraph 4 which, if exercised through a fixed place of business,

would not make this fixed place of business a permanent establishment under the

provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a

Contracting State merely because it carries on business in that State through a broker,

general commission agent or any other agent of an independent status, provided that

such persons are acting in the ordinary course of their business.

7. The fact that a company which is a resident of a Contracting State controls or is

controlled by a company which is a resident of the other Contracting State, or which

carries on business in that other State (whether through a permanent establishment or

otherwise), shall not of itself constitute either company a permanent establishment of

the other.

Article 6

INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property

(including income from agriculture or forestry) situated in the other Contracting State

may be taxed in that other State.

2. The term immovable property shall have the meaning which it has under the law

of the Contracting State in which the property in question is situated. The term shall

in any case include property accessory to immovable property, livestock and

equipment used in agriculture and forestry, rights to which the provisions of general

law respecting landed property apply, usufruct of immovable property and rights to

variable or fixed payments as consideration for the working of, or the right to work,

mineral deposits, sources and other natural resources; ships, boats and aircraft shallnot be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use,

letting or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from

immovable property of an enterprise and to income from immovable property used

for the performance of independent personal services.


8/25

8

Article 7

BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that State

unless the enterprise carries on business in the other Contracting State through apermanent establishment situated therein. If the enterprise carries on business as

aforesaid, the profits of the enterprise may be taxed in the other State but only so

much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State

carries on business in the other Contracting State through a permanent establishment

situated therein, there shall in each Contracting State be attributed to that permanent

establishment the profits which it might be expected to make if it were a distinct and

separate enterprise engaged in the same or similar activities under the same or similar

conditions and dealing wholly independently with the enterprise of which it is a

permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as

deductions expenses which are incurred for the purposes of the permanent

establishment, including executive and general administrative expenses so incurred,

whether in the State in which the permanent establishment is situated or elsewhere.

4. Insofar as it has been customary in a Contracting State to determine the profits to

be attributed to a permanent establishment on the basis of an apportionment of the

total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude

that Contracting State from determining the profits to be taxed by such anapportionment as may be customary; the method of apportionment adopted shall,

however, be such that the result shall be in accordance with the principles contained

in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the mere

purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to the

permanent establishment shall be determined by the same method year by year unless

there is good and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately in other

Articles of this Agreement, then the provisions of those Articles shall not be affected

by the provisions of this Article.


9/25

9

Article 8

SHIPPING AND AIR TRANSPORT

1. Profits derived by a resident of a Contracting State from the operation of ships or

aircraft in international traffic shall be taxable only in that Contracting State.

2. The provisions of paragraph 1 shall also apply to profits from the participation in a

pool, a joint business or an international operating agency.

Article 9

ASSOCIATED ENTERPRISES

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly in the

management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management, control

or capital of an enterprise of a Contracting State and an enterprise of the other

Contracting State,

and in either case conditions are made or imposed between the two enterprises in their

commercial or financial relations which differ from those which would be made

between independent enterprises, then any profits which would, but for thoseconditions, have accrued to one of the enterprises, but, by reason of those conditions,

have not so accrued, may be included in the profits of that enterprise and taxed

accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State

and taxes accordingly profits on which an enterprise of the other Contracting State

has been charged to tax in that other State and the profits so included are profits

which would have accrued to the enterprise of the first-mentioned State if the

conditions made between the two enterprises had been those which would have been

made between independent enterprises, then that other State shall make an

appropriate adjustment to the amount of the tax charged therein on those profits if itagrees with the adjustment made by the first-mentioned State. In determining such

adjustment, due regard shall be had to the other provisions of this Agreement and the

competent authorities of the Contracting States shall if necessary consult each other.


10/25

10

Article 10

DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a

resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the

company paying the dividends is a resident and according to the laws of that State,

but if the beneficial owner of the dividends is a resident of the other Contracting

State, the tax so charged shall not exceed:

(a) 0 per cent of the gross amount of the dividends if the beneficial owner is a

company (other than a partnership that is not liable to tax), which has held directly at

least 25 per cent of the capital of the company paying the dividends for an

uninterrupted period of at least 12 months prior to the decision to distribute the

dividends;

(b) 5 per cent of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits

out of which the dividends are paid.

The competent authorities of the Contracting States shall by mutual agreement settle

the mode of application of these limitations.

3. The term dividends as used in this Article means income from sharesjouissance shares or jouissance rights, mining shares, founders shares or other

rights, not being debt-claims, participating in profits, as well as income from other

corporate rights which is subjected to the same taxation treatment as income from

shares by the laws of the State of which the company making the distribution is a

resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the

dividends, being a resident of a Contracting State, carries on business in the other

Contracting State of which the company paying the dividends is a resident through a

permanent establishment situated therein or performs in that other State independent

personal services from a fixed base situated therein, and the holding in respect ofwhich the dividends are paid is effectively connected with such permanent

establishment or fixed base. In such case the provisions of Article 7 or Article 14 of

this Agreement shall apply.

5. Where a company which is a resident of a Contracting State derives profits or

income from the other Contracting State, that other State may not impose any tax on

the dividends paid by the company, except insofar as such dividends are paid to a

resident of that other State or insofar as the holding in respect of which the dividends

are paid is effectively connected with a permanent establishment situated in that other

State, nor subject the company's undistributed profits to a tax on the company's


11/25

11

undistributed profits, even if the dividends paid or the undistributed profits consist

wholly or partly of profits or income arising in such other State.

Article 11

INTEREST

1. Interest arising in a Contracting State and beneficially owned by a resident of the

other Contracting State shall be taxable only in that other State.

2. The term interest as used in this Article means income from debt-claims of every

kind, whether or not secured by mortgage and whether or not carrying a right to

participate in the debtor's profits, and in particular, income from government

securities and income from bonds or debentures, including premiums and prizes

attaching to such securities, bonds or debentures, but does not include income dealt

with in Article 10 of this Agreement. Penalty charges for late payment shall not be

regarded as interest for the purpose of this Article.

3. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest,

being a resident of a Contracting State, carries on business in the other Contracting

State in which the interest arises, through a permanent establishment situated therein

or performs in that other State independent personal services from a fixed base

situated therein and the debt-claim in respect of which the interest is paid is

effectively connected with such permanent establishment or fixed base. In such case

the provisions of Article 7 or Article 14 of this Agreement shall apply.

4. Interest shall be deemed to arise in a Contracting State when the payer is a resident

of that State. Where, however, the person paying the interest, whether he is a resident

of a Contracting State or not, has in a Contracting State a permanent establishment or

a fixed base in connection with which the indebtedness on which the interest is paid

was incurred, and such interest is borne by such permanent establishment or fixed

base, then such interest shall be deemed to arise in the State in which the permanent

establishment or fixed base is situated.

5. Where, by reason of a special relationship between the payer and the beneficial

owner or between both of them and some other person, the amount of the interest,having regard to the debt-claim for which it is paid, exceeds the amount which would

have been agreed upon by the payer and the beneficial owner in the absence of such

relationship, the provisions of this Article shall apply only to the last-mentioned

amount. In such case, the excess part of the payments shall remain taxable according

to the laws of each Contracting State, due regard being had to the other provisions of

this Agreement.


12/25

12

Article 12

ROYALTIES

1. Royalties arising in a Contracting State and beneficially owned by a resident of the

other Contracting State shall be taxable only in that other State.

2. The term royalties as used in this Article means payments of any kind received

as a consideration for the use of, or the right to use, any copyright of literary, artistic

or scientific work including cinematograph films, any patent, trade mark, design or

model, plan, secret formula or process, or for information concerning industrial,

commercial or scientific experience.

3. The provisions of paragraph 1 shall not apply if the beneficial owner of the

royalties, being a resident of a Contracting State, carries on business in the other

Contracting State in which the royalties arise, through a permanent establishmentsituated therein, or performs in that other State independent personal services from a

fixed base situated therein, and the right or property in respect of which the royalties

are paid is effectively connected with such permanent establishment or fixed base. In

such case the provisions of Article 7, or Article 14 of this Agreement shall apply.

4. Royalties shall be deemed to arise in a Contracting State when the payer is a

resident of that Contracting State. Where, however, the person paying the royalties,

whether he is a resident of a Contracting State or not, has in a Contracting State a

permanent establishment or a fixed base in connection with which the liability to pay

the royalties was incurred, and such royalties are borne by such permanent

establishment or fixed base, then such royalties shall be deemed to arise in the Statein which the permanent establishment or fixed base is situated.

5. Where, by reason of a special relationship between the payer and the beneficial

owner or between both of them and some other person, the amount of the royalties,

having regard to the use, right or information for which they are paid, exceeds the

amount which would have been agreed upon by the payer and the beneficial owner in

the absence of such relationship, the provisions of this Article shall apply only to the

last-mentioned amount. In such case, the excess part of the payments shall remain

taxable according to the laws of each Contracting State, due regard being had to the

other provisions of this Agreement.

Article 13

CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of

immovable property referred to in Article 6 and situated in the other Contracting State

may be taxed in that other State.


13/25

13

2. Gains from the alienation of movable property forming part of the business

property of a permanent establishment which an enterprise of a Contracting State has

in the other Contracting State or of movable property pertaining to a fixed base

available to a resident of a Contracting State in the other Contracting State for the

purpose of performing independent personal services, including such gains from thealienation of such a permanent establishment (alone or with the whole enterprise) or

of such fixed base, may be taxed in that other State.

3. Gains derived by an enterprise of a Contracting State from the alienation of ships

or aircraft operated in international traffic or movable property pertaining to the

operation of such ships or aircraft shall be taxable only in that State.

4. Gains derived by a resident of a Contracting State from the alienation of shares or

comparable interests deriving more than 50 per cent of their value directly or

indirectly from immovable property situated in the other Contracting State may be

taxed in that other State.

5. Gains from the alienation of any property other than that referred to in paragraphs

1, 2, 3 and 4 shall be taxable only in the Contracting State of which the alienator is a

resident.

Article 14

INDEPENDENT PERSONAL SERVICES

1. Income derived by an individual who is a resident of a Contracting State in respect

of professional services or other activities of an independent character shall be taxable

only in that State unless he has a fixed base regularly available to him in the other

Contacting State for the purpose of performing his activities. If he has such a fixed

base, the income may be taxed in the other State but only so much of it as is

attributable to that fixed base.

2. The term professional services includes especially independent scientific,

literary, artistic, educational or teaching activities as well as the independent activities

of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15

INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21 of this Agreement,

salaries, wages and other similar remuneration derived by a resident of a Contracting

State in respect of an employment shall be taxable only in that State unless the

employment is exercised in the other Contracting State. If the employment is so

exercised, such remuneration as is derived therefrom may be taxed in that other State.


14/25

14

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident

of a Contracting State in respect of an employment exercised in the other Contracting

State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding

in the aggregate 183 days in any twelve month period commencing or ending in the

tax year concerned, and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident

of the other State, and

(c) the remuneration is not borne by a permanent establishment or a fixed base

which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in

respect of an employment exercised aboard a ship or aircraft operated in international

traffic by an enterprise of a Contracting State, may be taxed in the Contracting State

in which the enterprise which operates the ship or aircraft is a resident.

Article 16

DIRECTORS' FEES

Directors' fees and other similar payments derived by a resident of a Contracting Statein his capacity as a member of the board of directors or the supervisory board of a

company which is a resident of the other Contracting State may be taxed in that other

State.

Article 17

ARTISTES AND SPORTSMEN

1. Notwithstanding the provisions of Articles 7, 14, and 15 of this Agreement, income

derived by a resident of a Contracting State as an entertainer, such as a theatre,

motion picture, radio or television artiste, or a musician, or as a sportsman, from his

personal activities as such exercised in the other Contracting State, may be taxed in

that other State.

2. Where income in respect of personal activities exercised by an entertainer or a

sportsman in his capacity as such accrues not to the entertainer or sportsman himself

but to another person, that income may, notwithstanding the provisions of Articles 7,

14, and 15 of this Agreement, be taxed in the Contracting State in which the activities

of the entertainer or sportsman are exercised.


15/25

15

3. Notwithstanding the preceding provisions of this Article, income derived by

entertainers or sportsmen who are residents of a Contracting State from the activities

exercised in the other Contacting State under a plan of cultural exchange between the

Governments of both Contracting States shall be exempt from tax in that other State.

Article 18

PENSIONS

Pensions and other similar remuneration arising in a Contracting State and paid to a

resident of the other Contracting State in consideration of past employment shall be

taxable only in the first-mentioned State.

Article 19

GOVERNMENT SERVICE

1. (a) Salaries, wages and other similar remuneration paid by a Contracting State or a

territorial-administrative unit or a local authority thereof to an individual in respect of

services rendered to that State or unit or authority shall be taxable only in that State.

(b) However, such salaries, wages and other similar remuneration shall be taxable

only in the other Contracting State if the services are rendered in that State and the

individual is a resident of that State who:

(i) is a national of that State; or

(ii) did not become a resident of that State solely for the purpose of

rendering the services.

2. The provisions of Articles 15, 16, 17, and 18 of this Agreement shall apply to

salaries, wages and other similar remuneration in respect of services rendered in

connection with a business carried on by a Contracting State or territorial-

administrative unit or a local authority thereof.

Article 20

STUDENTS

1. Payments which a student, or business apprentice who is or was immediately

before visiting a Contracting State a resident of the other Contracting State and who is

present in the first-mentioned State solely for the purpose of his education or training,

receives for the purpose of his maintenance, education or training shall not be taxed

in that State, provided that such payments arise from sources outside that State.


16/25

16

2. Remuneration which a student or business apprentice who is or was immediately

before visiting a Contracting State a resident of the other Contracting State derives

from an employment which he exercises in the first-mentioned State for a period or

periods not exceeding in the aggregate 183 days in the tax year concerned shall not betaxed in the first-mentioned State if the employment is directly related to his studies

or apprenticeship carried out in the first mentioned State.

Article 21

PROFESSORS AND TEACHERS

1. A professor or teacher who visits one of the Contracting States for a period not

exceeding two years reckoned from the date he first visits that Contracting State for

the sole purpose of teaching or carrying out advanced study (including research) at a

university, college or other recognised research institute or other establishment for

higher education in that Contracting State and who was immediately before that visit

a resident of the other Contracting State shall be exempt from tax in the first-

mentioned Contracting State on any remuneration for such teaching or study.

2. The preceding provisions of this Article shall not apply to remuneration which a

professor or teacher receives for conducting research if the research is undertaken

primarily for the private benefit of a specific person or persons.

Article 22

OTHER INCOME

1. Items of income of a resident of a Contracting State, wherever arising, not dealt

with in the foregoing Articles of this Agreement shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income from

immovable property as defined in paragraph 2 of Article 6 of this Agreement, if the

recipient of such income, being a resident of a Contracting State, carries on business

in the other Contracting State through a permanent establishment situated therein orperforms in that other State independent personal services from a fixed base situated

therein and the right or property in respect of which the income is paid is effectively

connected with such permanent establishment or fixed base. In such case the

provisions of Article 7 or Article 14 of this Agreement shall apply.

3. Notwithstanding the provisions of paragraphs 1 and 2, items of income derived by

an individual who is a resident of a Contracting State from gambling and lotteries and

arising in the other Contracting State may be taxed in that other State.


17/25

17

Article 23

CAPITAL

1. Capital represented by immovable property referred to in Article 6 of this

Agreement, owned by a resident of a Contracting State and situated in the otherContracting State, may be taxed in that other State.

2. Capital represented by movable property forming part of the business property of a

permanent establishment which an enterprise of a Contracting State has in the other

Contracting State or by movable property pertaining to a fixed base available to a

resident of a Contracting State in the other Contracting State for the purpose of

performing independent personal services, may be taxed in that other State.

3. Capital of an enterprise of a Contracting State represented by ships and aircraft

operated in international traffic and by movable property pertaining to the operation

of such ships and aircraft, shall be taxable only in that State.

4. All other elements of capital of a resident of a Contracting State shall be taxable

only in that State.

Article 24

ELIMINATION OF DOUBLE TAXATION

1. In Georgia double taxation shall be eliminated as follows:

(a) Where a resident of Georgia derives income or owns capital which, in accordance

with the provisions of this Agreement, may be taxed in Hungary, Georgia shall allow:

(i) as a deduction from the tax on the income of that resident, an amount

equal to the income tax paid in Hungary;

(ii) as a deduction from the tax on the capital of that resident, an amount

equal to the capital tax paid in Hungary.

Such deduction in either case shall not, however, exceed that part of theincome tax or capital tax, as computed before the deduction is given, which is

attributable, as the case may be, to the income or the capital which may be

taxed in Hungary.

(b) Where in accordance with any provision of the Agreement income derived or

capital owned by a resident of a Georgia is exempt from tax in Georgia, Georgia may

nevertheless, in calculating the amount of tax on the remaining income or capital of

such resident, take into account the exempted income or capital.


18/25

18

2. In Hungary double taxation shall be eliminated as follows:

(a) Where a resident of Hungary derives income or owns capital which, in accordance

with the provisions of this Agreement may be taxed in Georgia, Hungary shall,

subject to the provisions of subparagraphs (b) and (c), exempt such income or capitalfrom tax.

(b) Where a resident of Hungary derives items of income which, in accordance with

the provisions of Article 10, may be taxed in Georgia, Hungary shall allow as a

deduction from the tax on the income of that resident an amount equal to the tax paid

in Georgia. Such deduction shall not, however, exceed that part of the tax, as

computed before the deduction is given which is attributable to such items of income

derived from Georgia.

(c) Where in accordance with any provision of this Agreement income derived or

capital owned by a resident of Hungary is exempt from tax in Hungary, Hungary may

nevertheless, in calculating the amount of tax on the remaining income or capital of

such resident, take into account the exempted income or capital.

(d) The provisions of subparagraph (a) shall not apply to income derived or capital

owned by a resident of Hungary where Georgia applies the provisions of this

Agreement to exempt such income or capital from tax or applies the provisions of

paragraph 2 of Article 10 to such income.

Article 25

NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting

State to any taxation or any requirement connected therewith, which is other or more

burdensome than the taxation and connected requirements to which nationals of that

other State in the same circumstances, in particular with respect to residence, are or

may be subjected. This provision shall, notwithstanding the provisions of Article 1,

also apply to persons who are not residents of one or both of the Contracting States.

2. Stateless persons who are residents of a Contracting State shall not be subjected ineither Contracting State to any taxation or any requirement connected therewith,

which is other or more burdensome than the taxation and connected requirements to

which nationals of the State concerned in the same circumstances, in particular with

respect to residence, are or may be subjected.

3. The taxation on a permanent establishment which an enterprise of a Contracting

State has in the other Contracting State shall not be less favourably levied in that

other State than the taxation levied on enterprises of that other State carrying on the

same activities. This provision shall not be construed as obliging a Contracting State

to grant to residents of the other Contracting State any personal allowances, reliefs


19/25

19

and reductions for taxation purposes on account of civil status or family

responsibilities which it grants to its own residents.

4. Except where the provisions of paragraph 1 of Article 9, paragraph 5 of Article 11,

or paragraph 5 of Article 12, apply, interest, royalties and other disbursements paid byan enterprise of a Contracting State to a resident of the other Contracting State shall,

for the purpose of determining the taxable profits of such enterprise, be deductible

under the same conditions as if they had been paid to a resident of the first-mentioned

State. Similarly, any debts of an enterprise of a Contracting State to a resident of the

other Contracting State shall, for the purpose of determining the taxable capital of

such enterprise, be deductible under the same conditions as if they had been

contracted to a resident of the first-mentioned State.

5. Enterprises of a Contracting State, the capital of which is wholly or partly owned

or controlled, directly or indirectly, by one or more residents of the other Contracting

State, shall not be subjected in the first-mentioned State to any taxation or any

requirement connected therewith which is other or more burdensome than the

taxation and connected requirements to which other similar enterprises of the first-

mentioned State are or may be subjected.

6. The provisions of this Article shall, notwithstanding the provisions of Article 2,

apply to taxes of every kind and description.

Article 26MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting States

result or will result for him in taxation not in accordance with the provisions of this

Agreement, he may, irrespective of the remedies provided by the domestic law of

those States, present his case to the competent authority of the Contracting State of

which he is a resident or, if his case comes under paragraph 1 of Article 25, to that of

the Contracting State of which he is a national. The case must be presented within

three years from the first notification of the action resulting in taxation not in

accordance with the provisions of this Agreement.

2. The competent authority shall endeavour, if the objection appears to it to be

justified and if it is not itself able to arrive at a satisfactory solution, to resolve the

case by mutual agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation which is not in accordance with this

Agreement. Any agreement reached shall be implemented notwithstanding any time

limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve by

mutual agreement any difficulties or doubts arising as to the interpretation or


20/25


21/25

21

permit a Contracting State to decline to supply information solely because it has no

domestic interest in such information.

5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting

State to decline to supply information solely because the information is held by abank, other financial

institution, nominee or person acting in an agency or a fiduciary capacity or because

it relates to ownership interests in a person.

Article 28

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic

missions or consular posts under the general rules of international law or under the

provisions of special agreements.

Article 29

OTHER PROVISIONS

1. This Agreement shall not be interpreted to mean that a Contracting State is

prevented from applying its domestic legal provisions on the prevention of tax

evasion or tax avoidance.If the foregoing provision results in double taxation, the competent authorities shall

consult each other pursuant to Article 26 paragraph 3 on how to avoid double

taxation.

2. Upon mutual agreement of the Contracting States, amendments and additions may

be introduced to this Agreement, arranged as separate Protocols and making integral

parts of this Agreement. These amendments shall enter into force subject to the

provisions of the Article 30 of this Agreement.


22/25

22

Article 30

ENTRY INTO FORCE

1. The Contracting Parties shall notify each other through diplomatic channels that

their domestic requirements for the entry into force of this Agreement have beencomplied with.

2. This Agreement shall enter into force on the 30th day following the receipt of the

latter of the notifications referred to in paragraph 1 and its provisions shall have effect

in both Contracting States:

(a) with respect to taxes withheld at source, on income derived on or after 1

January of the calendar year next following that in which the Agreement enters

into force;

(b) with respect to other taxes on income and taxes on capital, for taxes chargeable

for any tax year beginning on or after 1 January of the calendar year next following

that in which the Agreement enters into force.

Article 31

TERMINATION

This Agreement shall remain in force until terminated by a Contracting State. Either

Contracting State may terminate the Agreement through diplomatic channels, bygiving notice of termination at least six months before the end of any calendar year

after five years from the date of entry into force of the Agreement.

In such event, this Agreement shall cease to have effect in both Contracting States:

(a) with respect to taxes withheld at source, on income derived on or after 1

January of the calendar year next following that in which the notice is given;

(b) with respect to other taxes on income and taxes on capital, to taxes chargeable

for any tax year beginning on or after 1 January of the calendar year next following

that in which the notice is given.


23/25

23

IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this

Agreement.

Done in duplicate at thisday of ., in Georgian, Hungarian and

English languages, each text being equally authentic. In case of divergence of

interpretation the English text shall prevail.

For the Government of

Georgia


Hungary


24/25

24

PROTOCOL

At the moment of signing the Agreement between the Government of Georgia and the

Government of Hungary for the avoidance of double taxation and the prevention offiscal evasion with respect to taxes on income and on capital the undersigned have

agreed on the following provisions which shall form an integral part of the

Agreement.

1. For the purposes of this Agreement the place of effective management is the

place where the management of an enterprise and the executive officer or the group of

senior officers of the enterprise governing the day-to-day work of the whole

enterprise is settled for carrying on their activities.

Should the place of the management and the place of the day-to-day governing

activity differ from each other the place of the effective management will be the

place where the day-to-day governing activity is carried on.

2. It is understood that partnerships (betti trsasg, kzkereseti trsasg) established

in Hungary are taxed in Hungary as corporations, and they fall within the definition

of company and are residents in Hungary.

3. With respect of subparagraph e) of paragraph 1 Article 3 it is understood that in the

case of Georgia, the term company means enterprise or any entity which exercises

an economic activity.

4. With reference to Article 27:

It is understood that the Contracting States shall ensure the protection of personal data

transferred according to the Agreement and their domestic law. With regard to

personal data processing, the Contracting States shall follow the provisions of the

Agreement concerning confidentiality and utilization of the exchange of information.

They shall only transfer to each other personal data which are foreseeably relevant

and suitable for the achievement of the purposes set out in Article 27, and they shall

process the data received only for the period necessary to the implementation of the

Agreement. The Contracting States shall ensure the supervision of the lawfulness of

data processing through a separate authority in accordance with their domestic law.

Furthermore, the data subject shall, in accordance with the provisions of theAgreement and the respective domestic law, have:

(i) the right to request information about his/her personal data processed,

(ii) the right to initiate the erasure of the data processed illegally and the

rectification of data managed inaccurately, and

(iii) the right to legal remedy by an independent authority in case the rights

related to the processing of personal data are infringed.

5. Present Agreement shall in no way prejudice any obligations deriving from

Hungarys membership in the European Union.


25/25

In witness whereof, the undersigned, duly authorized thereto, have signed this

Protocol.

Done in duplicate at thisday of ., in Georgian, Hungarian and

English languages, each text being equally authentic. In case of divergence of

interpretation the English text shall prevail.


Georgia


Hungary

Documents

DTC agreement between Hungary and Georgia